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2007 Working papers

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Title/Author(s) Abstract Number

Trade Credit, International Reserves and Sovereign Debt

E. Kohlscheen and S. A. O’Connell

We present a unified model of sovereign debt, trade credit and international reserves. Our model shows that access to short-term trade credit and gross international reserves critically affect the outcome of sovereign debt renegotiations. [read more] 833

On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions

Claudio Mezzetti and Ilia Tsetlin

Theoretical models of multi-unit, uniform-price auctions assume that the price is given by the highest losing bid. In practice, however, the price is usually given by the lowest winning bid. [read more] 832

A Behavioural Power Index (updated 2009)

Serguei Kaniovski and Dennis Leech

We propose an empirically relevant measure of voting power that uses the information about real or assumed voting patterns conveyed by a joint probability distribution on the set of voting outcomes, and apply it to the voting data of the Supreme Court of the United States. [read more] 831

An Interview with Avinash Dixit

Andrew J Oswald

In this interview, which was recorded in 2007 to celebrate the receipt of an honorary doctorate from Warwick University, Avinash Dixit of Princeton University discusses why he is an economist and how he approaches economic research. [read more] 830

How Much Control is Enough? Monitoring and Enforcement under Stalin.

Andrei Markevich

Given wide scope for asymmetric information in huge hierarchies agents have a large capacity for opportunistic behaviour. Hidden actions increase transactions costs and cause the demand for monitoring and enforcement. [read more] 829

Hypertension and Happiness across Nations

David G. Blanchflower and Andrew J Oswald

In surveys of well-being, countries such as Denmark and the Netherlands emerge as particularly happy while nations like Germany and Italy report lower levels of happiness. But are these kinds of findings credible? [read more] 828

Death, Happiness and the Calculation of Compensatory Damages

Andrew J Oswald and Nattavudh Powdthavee

This paper studies the mental distress caused by bereavement. The largest emotional losses are from the death of a spouse; the second-worst in severity are the losses from the death of a child; the third-worst is the death of a parent. [read more] 827

Is Well-being U-Shaped over the Life Cycle?

David G. Blanchflower and Andrew J Oswald

We present evidence that psychological well-being is U-shaped through life. A difficulty with research on this issue is that there are likely to be omitted cohort effects (earlier generations may have been born in, say, particularly good or bad times). [read more] 826

Elite Scientists and the Global Brain Drain

Showkat Ali, Giles Carden, Benjamin Culling, Rosalind Hunter, Andrew J Oswald, Nicola Owen, Hilda Ralsmark, Natalie Snodgrass

There are signs – one is world university league tables – that people increasingly think globally when choosing the university in which they wish to work and study. This paper is an exploration of data on the international brain drain. We study highly-cited physicists, highly-cited bio-scientists, and assistant professors of economics. [read more] 825

The Double Majority Voting Rule of the EU Reform Treaty as a Democratic Ideal for an Enlarging Union: an Appraisal Using Voting Power Analysis (updated)

Dennis Leech and Haris Aziz

The Double Majority rule in the Treaty is claimed to be simpler, more transparent and more democratic than the existing rule. We examine these questions against the democratic ideal that the votes of all citizens in whatever member country should be of equal value using voting power analysis considering possible future enlargements involving candidate countries and then to a number of hypothetical future enlargements. [read more] 824

Combinatorial and computational aspects of multiple weighted voting games

Haris Aziz, Mike Paterson and Dennis Leech

Weighted voting games are ubiquitous mathematical models which are used in economics, political science, neuroscience, threshold logic, reliability theory and distributed systems. [read more] 823

Quantity Versus Quality in the Soviet Market for Weapons

Mark Harrison and Andrei Markevich

Military market places display obvious inefficiencies under most arrangements, but the Soviet defense market was unusual for its degree of monopoly, exclusive relationships, intensely scrutinized (in its formative years) by a harsh dictator. [read more] 822

Beliefs and Redistributive Politics under Incomplete Information

Tommaso Gabrieli

The reason why the social contract is so different in two otherwise comparable societies like the United States and continental Western European countries represents a challenging question. [read more] 821

Am I missing something? The effects of absence from class on student performance

Wiji Arulampalam, Robin A. Naylor and Jeremy Smith

We exploit a rich administrative panel data-set for cohorts of Economics students at a UK university in order to identify causal effects of class absence on student performance. [read more] 820

Some Remarks on the Ranking of Infinite Utility Streams

Bhaskar Dutta

A long tradition in welfare economics and moral philosophy, dating back at least to Sidgwick(1907) is the idea that all generations must be treated alike. [read more] 819

Recent Developments In The Theory Of Very Long Run Growth: A Historical Appraisal

Stephen Broadberry

This paper offers a historical appraisal of recent developments in the theory of very long run growth, focusing on three main areas: (1) linkages between wages, population and human capital (2) interactions between institutions, markets and technology and (3) sustaining the process of economic growth once it has started. [read more] 818

The Historical Roots Of India’s Service-Led Development : A Sectoral Analysis Of Anglo-Indian Productivity Differences, 1870-2000

Stephen Broadberry and Bishnupria Gupta

Overall labour productivity in India was already only around 15 per cent of the UK level between the early 1870s and the late 1920s. Between 1929 and 1950 India fell further behind and remained at around 10 per cent of the UK level until the 1970s. [read more] 817

The Dictator's Dilemma: to Punish or to Assist? Plan Failures and Interventions under Stalin

Andrei Markevich

A dictator issues an order, but the order is not carried out. The dictator does not know whether the order failed because the agent behaved opportunistically, or because his order contained some mistake. [read more] 816

Intergenerational Mobility of Migrants: Is There a Gender Gap?

Natalie Chen, Paola Conconi and Carlo Perroni

We examine gender differences in intergenerational patterns of social mobility for second-generation migrants. Empirical studies of social mobility have found that women are generally more mobile than men. [read more] 815

Market Selection and Payout Policy Under Majority Rule

Pablo F Beker

The purpose of this paper is to explain how the choice between distributing cash through dividends or shares repurchases affects the firm’s ability to raise capital in the financial market. I assume investors have quadratic preferences over wealth but different prior beliefs about the likelihood a distribution takes place. [read more] 814

Retained Earnings Dynamic , Internal Promotions and Walrasian Equilibrium

Pablo F Beker

In the early stages of the process of industry evolution, firms are financially constrained and might pay different wages to workers according to their expectations about the prospects for advancement offered by each firm’s job ladder. [read more] 813

Does Migration Empower Married Women?

Natalie Chen, Paola Conconi and Carlo Perroni

Household migration can affect labor market opportunities differently for the two spouses, both because of gender-specific differences between the skills of migrants and the skills that are in demand in the host country, and because of differences in the extent of gender-based labor market discrimination between the country of origin and the host country. [read more] 812

Does Tax Competition Really Promote Growth?

Marko Koethenbuerger and Ben Lockwood

This paper considers the relationship between tax competition and growth in an endogenous growth model where there are stochastic shocks to productivity,and capital taxes fund a public good which may be for final consumption or an infrastructure input. [read more] 810

Oil Prices, Profits and Recessions: An Inquiry Using Terrorism as an Instrument Variable

Natalie Chen, Liam Graham and Andrew Oswald

Nearly all post-war recessions have been preceded by oil-price shocks, but is this because spikes in the price of petroleum cause economic downturns? Most research has ignored an identification problem: oil prices and the state of the world economy are endogenously determined. [read more] 809

History: Sunk Cost or Widespread Externality

Peter J Hammond

In an intertemporal Arrow-Debreu economy with a continuum of agents, suppose that the auctioneer sets prices while the government institutes optimal lump-sum transfers period by period. [read more] 808

The Transition to Democracy: Collective Action and Intra-Elite Conflict

Sayantan Ghosal and Eugenio Proto

This paper studies how intra-elite confict results in transition to democracy, characterized as both franchise extension to, and lowering the individual cost of collective political action for, an initially disorganized non-elite. [read more] 807

Characterization of Risk: A Sharp Law of Large Numbers

Peter J Hammond and Yeneng Sun

An extensive literature in economics uses a continuum of random variables to model individual random shocks imposed on a large population. Let H denote the Hilbert space of square-integrable random variables. [read more] 806

The Causes of Excessive Deficits in The European Union

Vítor Castro

Several studies have identified the factors that cause public deficits in industrial democracies. They consider that economic, political and institutional factors play an important role in the understanding of those deficits. [read more] 805

Competitive Market Mechanisms as Social Choice Procedures

Peter J Hammond

A competitive market mechanism is a prominent example of a non-binary social choice rule, typically defined for a special class of economic environments in which each social state is an economic allocation of private goods, and individuals' preferences concern only their own personal consumption. [read more] 804

Monte Carlo Simulation of Macroeconomic Risk with a Continuum Agents: The General Case

Peter J Hammond and Yeneng Sun

In large random economies with heterogeneous agents, a standard stochastic framework presumes a random macro state, combined with idiosyncratic micro shocks. [read more] 803

Multidimensional Screening, Affiliation and Full Separation

Charles Blackorby and Dezsö Szalay

We solve a class of two-dimensional screening problems in which one dimension has the standard features, while the other dimension is impossible to exaggerate and enters the agent's utility only through the message but not the true type. [read more] 802

The Value Added Tax: Its Causes and Consequences

Michael Keen and Ben Lockwood

Almost unknown in 1960, the value added tax (VAT) is now found in more than 130 countries, raises around 20 percent of the world’s tax revenue, and has been the centerpiece of tax reform in many developing countries. [read more] 801

Women's Earning Power and the “Double Burden” of Market and Household Work

Natalie Chen, Paola Conconi and Carlo Perroni

Bargaining theory predicts that married women who experience a relative improvement in their labor market position should experience a comparative gain within their marriage. [read more] 800

Vertical Integration and Firm Boundaries: The Evidence

Francine Lafontaine and Margaret Slade

Understanding what determines firm boundaries and the choice between interacting in a firm or a market is not only the fundamental concern of the theory of the firm, but it is also one of the most important issues in economics. [read more] 799

Voting, Lobbying and the Decentralization Theorem

Ben Lockwood

This paper revisits the fiscal "decentralization theorem", by relaxing the role of the assumption that governments are benevolent, while retaining the assumption of policy uniformity. [read more] 798

Unit Versus Ad Valorem Taxes : The Private Ownership of Monopoly In General Equilibrium (updated Oct 2008)

Charles Blackorby and Sushama Murty

In an earlier paper [Blackorby and Murty; 2007] we showed that if a monopoly sector is imbedded in a general equilibrium framework and profits are taxed at one hundred percent, then unit (specific) taxation and ad valorem taxation are welfare-wise equivalent. [read more] 797

Moral Hazard and Entrepreneurial Failure in a Two-sector Model of Productive Matching - with an Application to the Natural Resource Curse

Carlo Perroni and Eugenio Proto

We analyze a two-sector, general-equilibrium model of productive matching and sorting, where risky production is carried out by pairs of individuals both exerting effort. [read more] 796

Is Partial Tax Harmonization Desirable?

Paola Conconi, Carlo Perroni and Raymond Riezman

We consider a setting in which capital taxation is characterized by two distortions working in opposite directions. On one hand, governments engage in tax competition and are tempted to lower capital tax rates. [read more] 795

The Impact of the European Union Fiscal Rules on Economic Growth

Vitor Castro

This study intends to provide an empirical answer to the question of whether Maastricht and SGP fiscal rules have affected growth of European Union countries. [read more] 794

Obesity, Unhappiness and The Challenge of Affluence: Theory and Evidence

Andrew Oswald and Nattavudh Powdthavee

Is affluence a good thing? The book The Challenge of Affluence by Avner Offer (2006) argues that economic prosperity weakens self-control and undermines human well-being. [read more] 793

Hypertension and Happiness across Nations

David G. Blanchflower and Andrew J. Oswald

A modern statistical literature argues that countries such as Denmark are particularly happy while nations like East Germany are not. Are such claims credible? The paper explores this by building on two ideas. [read more] 792

Migrant Smuggling

Yuji Tamura

We analyze the migrant smuggling market where smugglers differ in their capacities to exploit their clients' labor in the destination. [read more] 791

Pricing behaviour under competition in the UK electricity supply industry

Monica Giulietti, Jesus Otero and Michael Waterson

This paper investigates the evolution of electricity prices for domestic customers in the UK following the introduction of competition. The empirical analysis is based on a panel data set containing detailed information about electricity supply prices over the period 1999 to 2006. [read more] 790

Advertising and Labour Supply: Why Do Americans Work Such Long Hours?

Keith Cowling and Rattanasuda Poolsombat

Americans are working much longer hours in the paid labour market than workers in Western Europe. Much of the debate focuses on whether this is the result of voluntary worker choice or whether this is a decision imposed on workers by their employers. [read more] 789

The Impact of Parental Income and Education on Child Health: Further Evidence for England

Orla Doyle, Colm Harmon and Ian Walker

This paper investigates the robustness of recent findings on the effect of parental education and income on child health. We are particularly concerned about spurious correlation arising from the potential endogeneity of parental income and education. [read more] 788

The Morishima Gross Elasticity of Substitution

Charles Blackorby, Daniel Primont and R. Robert Russell

We show that the Hotelling-Lau elasticity of substitution, an extension of the Allen-Uzawa elasticity to allow for optimal output-quantity (or utility) responses to changes in factor prices, inherits all of the failings of the Allen-Uzawa elasticity identified by Blackorby and Russell [1989 AER]. [read more] 787

Sheer Class? Returns to educational performance: evidence from UK graduates' first destination labour market outcomes

Robin Naylor, Jeremy Smith and Abigail McKnight

We exploit individual-level administrative data for whole populations of UK university students for the leaving cohorts of 1985-1993 (together with that of 1998) to investigate the influence of degree performance on graduate occupational earnings. [read more] 786

Mortality and Immortality

Matthew D Rablen and Andrew J Oswald

It has been known for centuries that the rich and famous have longer lives than the poor and ordinary. Causality, however, remains trenchantly debated. [read more] 785

Testing for seasonal unit roots in heterogeneous panels in the presence of cross section dependence

Monica Giulietti, Jesus Otero and Jeremy Smith

This paper presents two alternative methods for modifying the HEGY-IPS test in the presence of cross-sectional dependency. [read more] 784

Different Returns to Different Degrees? Evidence from the British Cohort Study 1970

Massimiliano Bratti. Robin Naylor and Jeremy Smith

As in many other countries, government policy in the UK has the objective of raising the participation rate of young people in higher education, while also increasing the share of the costs of higher education borne by students themselves. [read more] 783

Nonlinearities in Intergenerational Earnings Mobility: Consequences for Cross-Country Comparisons

Bernt Bratsberg, Knut Røed, Oddbjørn Raaum, Robin Naylor, Markus Jäntti, Tor Eriksson, Eva Österbacka

We show that the patterns of intergenerational earnings mobility in Denmark, Finland, and Norway, unlike those for the US and the UK, are highly onlinear. The Nordic relationship between log earnings of sons and fathers is flat in the lower segments of the fathers’ earnings distribution – sons growing up in the poorest households have the same adult earnings prospects as sons in moderately poor households – and is increasingly positive in middle and upper segments. [read more] 782

American exceptionalism in a new light: a comparision of intergenerational earnings mobility in the Nordic countries, the United Kingdom and the United States

Markus Jäntti, Bernt Bratsberg, Knut Røed, Oddbjørn Raaum, Robin Naylor, Eva Österbacka, Anders Björklund and Tor Eriksson

We develop methods and employ similar sample restrictions to analyse differences in intergenerational earnings mobility across the United States, the United Kingdom, Denmark, Finland, Norway and Sweden. We examine earnings mobility among pairs of fathers and sons as well as fathers and daughters using both mobility matrices and regression and correlation coefficients. [read more] 781